SME2001 - Midterm 2 Practice Problem& Solution, CVP-Breakeven, V (1.0)
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Swapan Kumar SahaSME2001 - Midterm 2 Practice Problem& Solution, CVP-Breakeven, V (1.0)
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Swapan Kumar SahaBreakeven CVP Problem
You are asked by Babson to run a new coffee location on campus to
reduce the existing long coffee lines before the first class each morning, at Coffee Selling Price $ / 16 oz cup $ 3.00
lunch time, and at dinner time. Cost of 16oz coffee $ 0.28
Cost of 16oz cup $ 0.10
Cost of lid for cup $ 0.05
Babson suggest you sell each cup of coffee for $3.00. Babson will charge
Cream: cost per cup $ 0.08
you $2,500 each month for the room, equipment, and utilities. Plus, they
Sugar: cost per cup $ 0.02
will charge you on a per cup basis:
- $0.28 for the coffee, Rent for Equip, Room, & Utilities $ 2,500.00 per month
- $0.10 for each cup,
- $0.05 for each lid,
- $0.08 for cream, &
- $0.02 for sugar.
It is estimated that 50% of sales will take cream, 25% will take cream and
sugar, and 25% will be sales of just black coffee. You are to earn $0.25 on
each cup of coffee sold, plus you will share 50% all profits earned each
month. You sell 4,000 cups of coffee the first month.
Required.
1) What is your breakeven point in # and $
2) How much do you earn in the first month?
686243774.xlsx 1 of 2
Breakeven CVP Solution
You are asked by Babson to run a new coffee location on campus to
Coffee Selling Price $ / 16 oz cup $ 3.00
reduce the existing long coffee lines before the first class each morning, at
Cost of 16oz coffee $ 0.28
lunch time, and at dinner time.
Cost of 16oz cup $ 0.10
Cost of lid for cup $ 0.05
Babson suggest you sell each cup of coffee for $3.00. Babson will charge
Cream: cost per cup $ 0.08
you $2,500 each month for the room, equipment, and utilities. Plus, they
Sugar: cost per cup $ 0.02
will charge you on a per cup basis:
- $0.28 for the coffee, Rent for Equip, Room, & Utilities $ 2,500.00 per month
- $0.10 for each cup,
- $0.05 for each lid, Cream C&S Black
- $0.08 for cream, & 50% 25% 25%
- $0.02 for sugar. Cream: cost per cup $ 0.08 $ 0.04 $ 0.02 $ - $ 0.06
Sugar: cost per cup $ 0.02 $ 0.0100 $ 0.01
It is estimated that 50% of sales will take cream, 25% will take cream and Cost of 16oz coffee $ 0.28
sugar, and 25% will be sales of just black coffee. You are to earn $0.25 on Cost of 16oz cup $ 0.10
each cup of coffee sold, plus you will share 50% all profits earned each Cost of lid for cup $ 0.05
month. You sell 4,000 cups of coffee the first month. Weighted Ave Cup of Coffee $ 0.50
SP $ / cup $ 3.00
Required.
Var Cost / Cup $ 0.50
1) What is your breakeven point in # and $
Commission / Cup $ 0.25
2) How much do you earn in the first month?
Total VC / Cup $ 0.75
Contribution Margin / Cup $ 2.25
BE # TFC CM $ / # 1,112
BE $ TFC $ 3,336
Sales # for Month 4,000
Sales $ for Month $ 12,000
Var Cost $ 3,000
Contribution Margin $ $ 9,000
Rent for Equip, Room, & Utilities $ 2,500
Op Profit $ 6,500
50% Profit Share $ 3,250
Commissions $ 1,000
Total Earned $ 4,250
686243774.xlsx 2 of 2
